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Tuesday, April 4, 2017

Canada’s exports spoil the economic party

After an upbeat January for the Canadian economy
when the GDP grew by 2.3% in annual terms, which lead one economist to compare
that growth to fireworks, Canada’s trade data for February 2017 came much less impressive.
Canada's trade balance in November-January had been in surplus, but in February
it changed its direction and posted a deficit of $972 million, while the earlier
January figure was lowered by half to $421 million.

Export volumes in February fell 2.5% from January, while
import volumes rose 0.3%. Declines in exports were widespread and spanned
across most industries. This is all the more worrying provided the continuing
weakness of the Canadian dollar.

At the same time, Canada's exports in February were
still up by 4.4% compared to February 2016 which shows that Canada has been
able to overcome the effect of low oil prices.

Going further, Canadian exports will remain in
focus. American importers have so far been able, through heavy lobbying, to
fend off the main threat to the Canadian exports, a Border-Adjustment Tax,
proposed in the US. But the fate of the tax is far from decided and the threat to
Canadian exporters remains. Canada’s finance minister Bill Morneau said at
a World Economic Forum event in New York on Monday that the proposed US border
tax threatens to make both countries poorer.